Suspension of RMD Requirement for 2020

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Prudence
Posts: 574
Joined: Fri Mar 09, 2012 4:55 pm

Suspension of RMD Requirement for 2020

Post by Prudence »

I made a qualified charitable deduction (QCD) in January (withdrawal for tIRA). Also, I am planning to make the rest of my RMD before the end of this year. Due to the CARES Act suspension of 2020 RMD, is my January QCD still NOT subject to federal tax for the 2020 tax year? What will be the effect of skipping the RMD this year on the RMD due in 2021 and in future years?
fabdog
Posts: 1491
Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: Suspension of RMD Requirement for 2020

Post by fabdog »

your QCD will still count as a QCD. You'll get a 1099R for the amount, and then on your tax form you designate it as a QCD. Not taxable.

As you note, you do not have to do the remainder of your RMD, but can if you desire, and make more QCD up to the $100K limit

Skipping the RMD this year has no impact on future years. There is no "catch Up " required

Mike
Alan S.
Posts: 10197
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Suspension of RMD Requirement for 2020

Post by Alan S. »

Prudence wrote: Sat May 02, 2020 1:53 pm I made a qualified charitable deduction (QCD) in January (withdrawal for tIRA). Also, I am planning to make the rest of my RMD before the end of this year. Due to the CARES Act suspension of 2020 RMD, is my January QCD still NOT subject to federal tax for the 2020 tax year? What will be the effect of skipping the RMD this year on the RMD due in 2021 and in future years?
To the extent you do not take distributions this year due to no RMD, your account balance will be higher on 12/31 than it would have been, and when RMDs resume your RMD will be higher as a result.

However, if you do a QCD this year your year end account balance will be reduced. The current year benefit of a QCD this year is less due to no RMDs, but there is still a benefit in reducing your future RMDs through reducing your balance due to the QCD. The same is true of a conversion or any other optional distribution from the TIRA.
User avatar
1210sda
Posts: 1790
Joined: Wed Feb 28, 2007 8:31 am

Re: Suspension of RMD Requirement for 2020

Post by 1210sda »

Alan S. wrote: Sun May 03, 2020 12:31 pm
Prudence wrote: Sat May 02, 2020 1:53 pm I made a qualified charitable deduction (QCD) in January (withdrawal for tIRA). Also, I am planning to make the rest of my RMD before the end of this year. Due to the CARES Act suspension of 2020 RMD, is my January QCD still NOT subject to federal tax for the 2020 tax year? What will be the effect of skipping the RMD this year on the RMD due in 2021 and in future years?
To the extent you do not take distributions this year due to no RMD, your account balance will be higher on 12/31 than it would have been, and when RMDs resume your RMD will be higher as a result.

However, if you do a QCD this year your year end account balance will be reduced. The current year benefit of a QCD this year is less due to no RMDs, but there is still a benefit in reducing your future RMDs through reducing your balance due to the QCD. The same is true of a conversion or any other optional distribution from the TIRA.
Alan, have you seen the new RMD factors which are coming out due to the SECURE act? (age 72 RMD).
I guess it's possible that the new factors could result in a lower RMD and maybe offset a higher IRA balance.
User avatar
David Jay
Posts: 10021
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Suspension of RMD Requirement for 2020

Post by David Jay »

1210sda wrote: Sun May 03, 2020 1:27 pmAlan, have you seen the new RMD factors which are coming out due to the SECURE act? (age 72 RMD).
I guess it's possible that the new factors could result in a lower RMD and maybe offset a higher IRA balance.
I’m not Alan, but the new factors are being revised due to actuarial changes and precede the SECURE act. They have not been released to my knowledge, but a draft is available (I updated my financial spreadsheet with the proposed numbers in 2019).

The new factors assume a lonGer lifespan and thus will reduce the RMD percentage for any given year.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Alan S.
Posts: 10197
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Suspension of RMD Requirement for 2020

Post by Alan S. »

The proposed divisors expected for 2021 would have reduced RMDs very roughly by 6%.

However, due to the pandemic a case could be made to revisit the proposal, inasmuch as mortality improvements earlier this century peaked about 4 years ago and lately reversed among some groups due mainly to the opioid crisis. And now we have the pandemic which is far from over and is causing deferral in addressing pre existing health issues and possibly creating new non pandemic issues.

Have not heard any specifics or rumors, but it would not be a shock if the new tables are deferred or even revisited.
User avatar
celia
Posts: 11886
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Suspension of RMD Requirement for 2020

Post by celia »

I think it is also possible the government might revisit the proposed change in RMDs once it realizes how much it needs the money sooner rather than later. Of course, anything is possible these days of uncertainty.
User avatar
LadyGeek
Site Admin
Posts: 68768
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Suspension of RMD Requirement for 2020

Post by LadyGeek »

I removed an off-topic post conjecturing on changes to the RMD mortality tables, which is proposed legislation. As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
Update: See below.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Gill
Posts: 6976
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Suspension of RMD Requirement for 2020

Post by Gill »

LadyGeek wrote: Sun May 03, 2020 6:01 pm I removed an off-topic post conjecturing on changes to the RMD mortality tables, which is proposed legislation. As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
It would appear this falls under the exception of proposed regulations. This is not legislation.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
User avatar
LadyGeek
Site Admin
Posts: 68768
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Suspension of RMD Requirement for 2020

Post by LadyGeek »

Thanks, I corrected my post (it was still off-topic for the thread).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
LadyGeek
Site Admin
Posts: 68768
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Suspension of RMD Requirement for 2020

Post by LadyGeek »

Prudence - Was your question answered?
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
Prudence
Posts: 574
Joined: Fri Mar 09, 2012 4:55 pm

Re: Suspension of RMD Requirement for 2020

Post by Prudence »

Yes, perfectly.
Post Reply